ZAKAT ON LEGAL ENTITIES (SHAKHSIYYAH I’TIBARIYYAH): A SHARI’AH ANALYSIS

Abstract

The purpose of this study is to explore the issues related to zakat
implementation on shakhsiyyah i'tibariyyah (legal entities) to
establish whether they are subject to zakat and the methodology for
zakat payment. The study examines the issues from the Shari’ah
perspective and concludes on several issues based on ijtihad
(independent reasoning) relying majorly on the sources of the
Shari’ah, opinions of classical and contemporary scholars and the
resolutions of the fiqh academies. Primarily, the Shari’ah recognises
the concept of shakhsiyyah i’tibariyyah. Although the imposition of
zakat is still largely vested on the shareholders of the company, the
company may still pay zakat at the company’s level provided that the
company is authorised to do so (by way of its Articles of Association
or decision made by the general assembly) or because the law
dictates so. This shows that the imposition of zakat is still vested with
the individuals, even though it can be paid at the company’s level. It
also proposes that, if the payment of zakat is to be made at the
company’s level, it also includes all shareholders including
ownership of non-Muslims, government-owned shares and shares
owned by waqf ahli. Nevertheless, the portion of payment to be paid
by the governments, non- Muslims, etc, are in actual fact not zakat.
However, for the purpose of consistency, there is no harm to name
and itemising this payment in the financial report of the company as
payment of zakat. The study also stresses on the need to facilitate for
a proper methodology for zakat payment and to offer proper
incentive for the payment of zakat in the manner that will be
beneficial to companies which pay zakat, the enforcement agencies
and the recipients.